Gain Foresight, Lose Flexibility

By Edward H. Baker  |  Posted 12-28-2005 Print Email
?">

Is there a risk of less flexibility in aligning to long-term operating models?

Yes, it's possible, but I think it's a finite risk. Look at Schneider National, a trucking company in Green Bay, Wis. Schneider had a unification model in the early 1990s that put it ahead of the game. But trucking is a highly competitive industry. And the company felt its profits weren't growing the way it wanted. So it decided to get into logistics, a field that was clearly going to be more profitable.

So Schneider looked at its technology and said, "OK, this is cool. We have very low-cost technology, and we can squeeze every ounce of value out of it." But logistics isn't about standardized data and processes. It's about putting a computer at the customer site and customizing to their needs. The whole model's different. So they had to build that capability.

As a company, Schneider moved from a unification model to a diversification model that built a parallel capability, and it didn't slow them down at all. Over time, in fact, the company was able to leverage some things from their logistics business in their trucking business.

I believe they've become far more agile because they're now capable of recognizing that the next strategic opportunity either leverages what they've got in place, which is their lowest-risk, highest-return opportunity, or that there just aren't enough of those opportunities anymore. And then they'll say, "Well, what are we going to do instead?" Then, instead of trying to latch it on to a capability that wasn't developed for that purpose at all, they will just build the next capability. They may do it by buying somebody, or they may do it by starting from scratch and creating something new.

Is there risk in this method? Of course, because if you don't have the platform in place, you're going to have to get one, and that's going to take longer, and it will take longer to make money on a new platform. If you're just leveraging what's in place, you can be profitable the next day. But I would say such options are less risky than not making up your mind who you are and what makes you different.

What is the real risk in building these architectures?

Lack of clarity. If you don't have good management practices, it's not that the architecture gets too rigid or outdated, but that the technologies themselves could get outdated.

If you can keep a company vibrant by maintaining the fundamental architecture of what's standardized and what's shared—that probably has a very long life. But making sure your technologies keep up with new developments is harder. You can evolve more power into the fundamental architecture as the world and the company evolves, or as your customer demands evolve. But changing those technologies, that's hard.

Are there any particular new technologies that you see coming down the pike that are going to make this job easier?

Everything associated with Web services is going to make it easier.

But it's not easy to take your legacy technologies and convert them to the latest thing. That will be the big challenge, and that's going to give a tremendous edge to newer, younger companies, because they don't have that legacy.

A lot of my colleagues who do research in the IT field love to study the newest companies and what they're doing. Yes, that's interesting. But the companies with the really interesting problems are the ones with a legacy. Because they are usually really good companies—after all, they're still around. But they will be very challenged. They're going to have to leverage their size, their brands and other things to compensate for the fact that they're not going to be able to move as fast as the newer companies.

But I think the really good ones are going to find ways. They always do.

So should we call this article "Alignment Doesn't Matter"?

Well, that would be one way of stating it. But a better name might be "Alignment Made Easy." Which, of course, isn't at all true. But how we're going to do it is. In other words, it became possible. We're no longer going to try to align with the daily swings of strategy and market conditions. We're now going to align to a clear understanding of how the company is going to survive and grow. And that's a much more powerful concept.

Right now, IT too often creates sad surprises at companies. The business wants to do something, and IT says, "OK, tell me exactly what you want to do, and I'll have it ready in two years." Instead, IT should be telling the business, "Now you're capable of doing things that customers would like and in some cases things they haven't even thought about yet. If you think they'd like it, we can start selling it."

When you are developing an effective enterprise architecture and it gets built into your organization and becomes part of your operational model, you have created a new competency, a very valuable competency. And from that you get happy surprises. I think that's a very powerful way of thinking about what IT ought to be in a company.



 

Submit a Comment

Loading Comments...
 
 
 
 
 
 
Thanks for your registration, follow us on our social networks to keep up-to-date